Norfolk Southern Corp. (NYSE:NSC)

Net Operating Profit After Taxes (NOPAT)

From 2017 to 2019, there was a consistent increase in NOPAT, rising from 2,921 million US dollars in 2017 to 3,546 million US dollars in 2019. In 2020, a noticeable decline occurred, with NOPAT decreasing to 2,658 million US dollars. However, in 2021, the figure recovered significantly to 3,711 million US dollars, surpassing previous years' levels.

Invested Capital

Invested capital exhibited a steady upward trend from 2017 through 2021. The value increased gradually from 33,382 million US dollars in 2017 to 35,469 million US dollars in 2021, showing consistent capital deployment despite fluctuations in profitability.

Return on Invested Capital (ROIC)

The ROIC percentage followed a pattern similar to NOPAT, improving from 8.75% in 2017 to 10.06% in 2019. A marked decline to 7.5% occurred in 2020, paralleling the drop in operating profit. In 2021, ROIC rebounded to 10.46%, reaching the highest point in the five-year span.

Operating Profit Margin (OPM)

The operating profit margin demonstrates a generally positive trend over the analyzed period. It increased modestly from 35.12% in 2017 to 36.44% in 2019, followed by a noticeable decline to 32.35% in 2020. However, in 2021 the margin significantly improved to 40.73%, the highest recorded in this timeframe. This pattern suggests fluctuating operating efficiency with a marked recovery and enhancement in profitability by the end of the period.

Turnover of Capital (TO)

The turnover of capital exhibits slight variability but remains relatively stable around the 0.3 ratio mark. Starting at 0.32 in 2017, it rose slightly to 0.34 in 2018, then returned to 0.32 in 2019. A decline occurred in 2020, dropping to 0.28, followed by a modest recovery to 0.31 in 2021. Overall, this indicates a generally consistent utilization of capital with minor fluctuations, possibly influenced by external or operational factors in 2020.

1 – Effective Cash Tax Rate (CTR)

The 1 minus effective cash tax rate shows an upward trend from 78.84% in 2017 to a peak of 86.16% in 2019, indicating a reduction in the effective cash tax rate over these years. Although there is a slight decrease to 83.92% in 2020 and further to 81.77% in 2021, the values remain higher than those at the beginning of the period. This suggests improved tax efficiency or changes in tax strategy resulting in lower cash tax burdens during most of the timeframe.

Return on Invested Capital (ROIC)

Return on invested capital shows an overall increasing trend with some volatility. It rose from 8.75% in 2017 to 10.06% in 2019, indicating improving returns. In 2020, a significant decline to 7.5% occurred, reflecting a period of reduced capital efficiency or profitability. However, the measure rebounded strongly to 10.46% in 2021, surpassing previous highs. This pattern highlights resiliency and an eventual enhancement in the effectiveness of invested capital during the latest period.

The financial data over the five-year period reveals several notable trends and fluctuations. The net operating profit before taxes (NOPBT) initially showed a steady increase from 2017 through 2019, rising from $3,705 million to $4,116 million. However, 2020 saw a significant decline to $3,167 million, followed by a strong recovery in 2021, reaching the highest level in the period at $4,539 million.

Railway operating revenues followed a somewhat similar pattern but with less volatility. Revenues increased from $10,551 million in 2017 to a peak of $11,458 million in 2018. There was a slight decline in 2019 to $11,296 million, and a more pronounced drop in 2020 to $9,789 million, reflecting a challenging environment that year. Revenues rebounded in 2021 to $11,142 million, nearing previous highs.

The operating profit margin (OPM) percentage mirrors the trends seen in NOPBT and revenues but with more pronounced changes in profitability. The margin was relatively stable and gradually increased from 35.12% in 2017 to 36.44% in 2019. In 2020, there was a notable decline to 32.35%, indicating reduced operating efficiency or increased costs relative to revenues during that year. The margin then substantially improved in 2021 to 40.73%, marking the strongest profitability margin over the five years.

Summary of Trends

The data reflects a period of growth in operating profit and revenue up to 2019, disrupted by a downturn in 2020, likely due to economic or sector-specific challenges. Both revenue and profit metrics rebounded markedly in 2021, showing resilience and recovery. The operating profit margin highlights an improvement in cost control or operational efficiency post-2020 downturn, achieving the highest margin in the analyzed period.

Insights

The dip in 2020 across all key metrics suggests external pressures that impacted operational performance but did not permanently impair the company's profitability. The strong recovery in 2021 points to effective management responses and possibly favorable market conditions. The increase in operating profit margin to over 40% in 2021 reflects enhanced profitability relative to revenue, demonstrating improved operational leverage or cost management during that period.

The financial data reveals several key trends over the five-year period ending December 31, 2021.

Railway Operating Revenues

Revenues increased from 10,551 million USD in 2017 to a peak of 11,458 million USD in 2018, followed by a slight decline to 11,296 million USD in 2019. There was a notable drop to 9,789 million USD in 2020, likely reflecting external challenges during that year. Revenues partially recovered to 11,142 million USD in 2021, though still below the peak observed in 2018.

Invested Capital

The invested capital showed steady growth across the period, rising from 33,382 million USD in 2017 to 35,469 million USD in 2021. The yearly increases were moderate but consistent, indicating ongoing investment in capital assets.

Turnover of Capital (TO)

The turnover of capital ratio, calculated as the ratio of operating revenues to invested capital, was highest in 2018 at 0.34. This ratio declined gradually to 0.32 in 2019 and further dropped to its lowest point of 0.28 in 2020, correlating with the dip in revenues. A recovery to 0.31 in 2021 reflects improving efficiency in generating revenues from invested capital, though it had not reached earlier peak levels.

Overall, the data indicates that while invested capital has been progressively increasing, the company faced challenges in maintaining consistent revenue growth, especially in 2020. The turnover of capital ratio trends suggest a decline in capital efficiency in 2020, with some improvement in 2021 but not yet at pre-2020 levels.

Cash Operating Taxes

Cash operating taxes demonstrated a generally decreasing trend from 2017 to 2020, declining from 784 million USD in 2017 to 509 million USD in 2020. However, there was a significant increase in 2021, reaching 827 million USD, which is the highest value in the observed period.

Net Operating Profit Before Taxes (NOPBT)

NOPBT showed an overall upward trajectory from 2017 through 2019, moving from 3,705 million USD to 4,116 million USD. This was followed by a notable decline in 2020 to 3,167 million USD, likely reflecting external challenges impacting profitability. The figure rebounded sharply in 2021, reaching 4,539 million USD, surpassing previous years' levels.

Effective Cash Tax Rate (CTR)

The effective cash tax rate declined steadily from 21.16% in 2017 to a low of 13.84% in 2019, indicating a decreasing tax burden relative to operating profits. There was a slight increase to 16.08% in 2020, followed by a further rise to 18.23% in 2021. Despite this increase, the rate in 2021 remained below the initial 2017 level.

Overall Analysis

The data indicates that operating profits before taxes generally grew until 2019, were impacted negatively in 2020, and then recovered strongly in 2021. Cash operating taxes fell in the initial years but increased significantly in the last period, reflecting changes in tax charges or profitability. The effective cash tax rate trend suggests tax planning or changes in tax regulations affecting the company’s tax expense, with rates dropping substantially by 2019 and partially rising subsequently. The combined movements in profit, tax, and tax rates demonstrate a dynamic financial environment with recovery signs in 2021 after the dip in 2020.